A Compendium of Matters Involving Trusts and Estates in California

January 19, 2017

Medi-Cal Recovery is Obsolete with Trusts!

What I really mean: SET UP YOUR LIVING TRUST TODAY!

The California legislature has passed a new bill that prohibits the California Department of Healthcare Services (DHS) from making a Medi-Cal recovery claim or Medi-Cal recovery lien against assets that are either vested in a trust or pass by way of a payable on death beneficiary. Or assets that are held in joint tenancy.

What is Medi-Cal?

Generally, Medi-Cal is California’s version of the Medicaid programs available in other states.

Only Medi-Cal can explain what Medi-Cal is and this is straight from their website:

“Medi-Cal offers free or low-cost health coverage for California residents who meet eligibility requirements. Most applicants who apply through Covered California and enroll in Medi-Cal will receive care through managed health plans.”

Medi-Cal eligibility for the most part is based on income and designed for low income individuals. Individuals or families with less than $2,000 in assets, but some assets are considered exempt. An exempt asset would be a primary home, a family car and a burial plot to provide easy examples. So if a person had a home, a car and less than $2,000 in the bank with no viable means to pay for their own medical care as to long term care or related care then that person may be eligible for Medi-Cal.

But what does this mean in context of estate planning?

Well, many people work hard, save well and still worry about adequately providing for their own longevity and long term care if they “run” out of money during their lifetime.

It can happen to an individual or family where end of life nursing home and other care costs far more than they have saved and the existing health insurance coverage will not cover – someone who needs expensive nursing home care for years. Nursing home care, for example, could run $5k or more a month. A person could have tapped all of their cash and retirement resources to provide for care and suddenly be in need of resources to provide for more care until end of life. Medi-cal at that point is an option for those individuals.

Medi-Cal Recovery

So let’s say you are now on Medi-Cal. Now what? Medi-Cal has a recovery program for certain individuals that used Medi-Cal benefits at age 55 or older, who have passed away and who own assets. Before the new law, Medi-Cal would seek recovery from anyone who was over 55 and had assets at their death. This means that your executor, successor trustee or personal representative would be required to give notice of your death to Medi-Cal so that Medi-Cal can write back and request that the amount of the services that they provided (with some rules) be paid back from your estate or trust.

Well, this has changed!

The new law states that Medi-Cal can only seek recovery from your assets ONLY if your assets are in PROBATE. If your assets have payable on death beneficiaries, are vested in a living trust or otherwise are owned jointly by another person when you pass, then Medi-Cal no longer has a right to seek recovery against those NON-PROBATE assets. How do things get to probate then? Things get to probate when you don’t have a trust, don’t have proper planning for your financial assets and ensure that everything you own has a place to go.

This means that setting up a revocable living trust that can be changed or modified during your lifetime is a great wa y to set up asset protection from Medi-Cal. This does not affect whether you would be eligible for Medi-Cal in the first place, but if you wind up receiving Medi-Cal benefits after age 55 and have proper planning in place then Medi-Cal cannot seek recovery against your assets.

If you have any questions, please feel free to email me directly at jsawday@tldlaw.com.

October 24, 2016

So do you plan to avoid having bad things happen to you too with legal documents?

What about planning for when you become alive but not well?

Do you have a plan about who can come into the hospital room to make medical decisions for you when you can’t? Or when you need someone to bring in your checkbook when you cannot manage your own finances due to injury or becoming otherwise incapacitated?

What does that planning look like? I bet you know where I am going with this. It’s a simple estate plan.

A trust, a pour over will, a durable power of attorney and an advance health care directive are the planning documents to design and execute now just in case something bad happens to you and you become alive and not well or in the event you pass away.

Here’s some FAQ about estate planning:

How long does it take to set up an estate plan?

If you have your information organized and have communicated all of your wishes to your attorney, it should take anywhere from 4 to 8 weeks to get the drafts generated, have you review them and then have a signing meeting with your attorney to have the estate plan fully executed.

What’s the typical cost for an estate plan?

Almost all estate plans generated out of our firm are priced at a flat fee customized for you. The flat fee range is from $1500 to $3500 and is dependent on whether you are married or not married. A married couple estate plan costs more as there are twice as many documents. If you have a larger estate, estate tax avoidance planning is often provided and that costs more. If you have a child with a special needs or difficult children, then the drafting is more complex as to the trust terms and rules so the fee is priced accordingly.

What does funding a trust mean?

Setting up a trust is easy. Just sign it and you’re done. But you have to transfer your financial assets to the trust so that it can avoid probate and do what the trust is designed.

Our firm will transfer all California real estate to your trust for you when you provide the information about what you own and this is discussed at the intake and the fee is priced accordingly to how many properties you own.

You will be given instructions on how to transfer ordinary bank accounts to the trust and specific rules for other kinds of financial products and accounts like retirement and life insurance.

How many meetings do I get with the attorney?

Typically two meetings. A meeting to determine what your wishes are and to fully explain what estate planning is and does. Then a second meeting to review all the documents, explain them again and then to execute them. You can arrange for more meetings if needed, but the fee will be adjusted sometimes to accommodate this.

Where are the original estate planning documents kept?

You will go home with all of the original estate planning documents in a binder. You keep the originals not us. Our firm will scan a copy and keep it electronically, but we do not need nor keep any original documents once you have executed the estate plan.

What does “estate plan” mean?

The term “estate plan” covers all documents and almost always includes a revocable living trust, pour over will, durable power of attorney and advance health care directive.

What’s a Schedule A?

A Schedule A or a Schedule of Assets is an ancillary document to your trust and lists all of your assets that are intended to be a part of your trust. It’s an important document actually! If you pass away, your successor trustee needs to know what assets to look for and this is an index of what you own.

If you are interested in setting up your own estate plan, contact us today! We make it as easy as possible and the peace of mind generated once you have executed your own documents is immeasurable!

October 05, 2016

This month the latest celebrity gossip was the petition filed by Angelina Jolie-Pitt for the dissolution of her marriage to Brad Pitt. This affects estate planning like no one’s business.

First, this means that if a married couple has already done their estate planning, which usually means the following documents:

Trust

Wills

Durable powers of attorney; and

Advance health care directives

And that these estate planning documents drafted and executed during happier times that named each other as spouses to be their agents – some of these documents need to be updated ASAP.

Let’s go through this.

If you have a durable power of attorney that says if you are alive but not well that your spouse should make financial decisions for you then this needs to be redone so that you can name someone else to make financial decisions for you in the durable power of attorney. It is easy to update your financial power of attorney. You can simply have your attorney draft and execute a new financial power of attorney that states in the event you are alive but not well that someone other than your spouse should make financial decisions for you. If you have considerable assets, you can name a private corporate fiduciary (a trust company for example) or a private professional fiduciary to make financial decisions for you. This is often a good idea as a fiduciary will make decisions in your best interests and not be involved in any drama.

This the same idea for the advance health care directive. You will want to execute a new advance health care directive to state that if you are not able to make your own medical decisions that someone other than your spouse can make medical decisions for you. You can name an adult child, someone in your own family or a family friend to make medical decisions for you. You may be able to also name a private professional fiduciary to also make medical decisions for you, but you need to ensure that such a private professional fiduciary would be willing.

Updating these two documents, the durable power of attorney and advance health care directive, is easy to do and can be done privately without violating any of the automatic stays that come into play in filing for a California divorce or dissolution of marriage.

That gets to the next concern: the automatic temporary restraining orders placed on the divorcing parties for California divorces. When either party files a petition for dissolution of marriage, legal separation or annulment in California, there are an automatic temporary restraining orders on the parties regarding manipulating community property assets while the divorce is pending.

The actual petition on FL-100 form states on the bottom of the 3 page the following notice:

NOTICE—CANCELLATION OF RIGHTS:

Dissolution or legal separation may automatically cancel the rights of a domestic partner or spouse under the other, domestic partner’s or spouse’s will, trust, retirement plan, power of attorney, pay-on-death bank account, survivorship rights to any property owned in joint tenancy, and any other similar thing. It does not automatically cancel the right of a domestic partner or spouse as beneficiary of the other partner’s or spouse’s life insurance policy. You should review these matters, as well as any credit cards, other credit accounts, insurance policies, retirement plans, and credit reports, to determine whether they should be changed or whether you should take any other actions. Some changes may require the agreement of your partner or spouse or a court order.

The Summons that is part of the dissolution process also contains standard family law restraining orders for the parties. This is found on the FL-110 Summons form and page 2 states in part:

“Starting immediately, you and your spouse or domestic partner are restrained from: ….

creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer, without the written consent of the other party or an order of the court. Before revocation of a nonprobate transfer can take effect or a right of survivorship to property can be eliminated, notice of the change must be filed and served on the other party.”

This means that the community property of the parties during the dissolution proceedings cannot be transferred or modified as to ownership or existing estate planning documents there must be a notice of change filed and served on the other party.

What can be done are new wills and trusts that do not affect the ownership of the assets, but are put in place to capture the assets once the divorce is finalized. The creation of a new separate property trust by a divorcing spouse to hold title to already existing separate property assets and to be a holding tank for the acquisition of the marital property once the divorce is finalized or the notice of the change has been provided is what needs to be done.

So while Angelina and Brad cannot dissolve any existing community property trusts or maneuvering existing community property assets, they can each draft new wills, new separate property trusts for assets held separately and also execute new durable powers of attorney and advance health care directives while their divorce is pending.

If you have questions about how this works for you, consult with one of the TLD estate planning or family law attorneys about your matter. Our offices are in Long Beach, Donwey, Irvine and Beverly Hills.

September 08, 2016

A common question that is often asked as people saunter through life is do I need an executor? Well, I am sure it is not something that you ask yourself all the time…. but you do need documents to be drafted and signed by you to ensure that if something bad happens to you – you have named people that can act for you.

If you create a will in California, the person that you name to handle your affairs when you die is your Executor. A will in California does not avoid probate. So people in California will also create a living trust or a revocable trust (these terms mean the exact same thing) and this is how you can avoid probate in California. The person you name in your trust to handle your affairs when you die is called a Successor Trustee.

It can be confusing if you need a will or a trust. The best way to find out exactly what you need and why is to take us up on our complimentary consultations for these matters. We can be reached at (877) 923-0971 for Los Angeles County clients and (949) 756-0684 for Orange County clients.

August 25, 2016

It’s hard to tell how you are getting good legal work done for your money in transactional legal matters. Just like it is hard to tell if you are seeing a medical practitioner / doctor. Sometimes only other doctors know if a certain doctor is a good one. The same applies in the selection of an attorney. Attorneys know of one another and they know the good ones. But how does a lay person, non-attorney know? It’s difficult to tell from just asking Google! Often lessons are learned the hard way but our wish is to prepare you, to guide you through selecting the right and trustworthy estate planning attorney to prepare and protect you and your family. To understand the importance of estate planning, read more here.

Here are some thoughts and tips if you are working with a good estate planning attorney in no particular order:

You understand what you are signing.

A good attorney explains in lay man’s (simple) terms what you are signing, reviews each document with you, points out the key provisions of each document and asks you to check names and spellings and other information that is unique to you.

The durable power of attorney is not just a two page standard “check the box” power of attorney that looks like it was downloaded from the internet.

A well drafted power of attorney should be at least 20 pages long and detail all the powers the person is giving to the agent. The power of attorney should name someone to act as agent and ought to have one or two more back up agents. The power of attorney should also be clear when it is effective. Some are effective immediately while others are effective upon incapacity.

The Advance Health Care Directive was not downloaded from a medical website and is a form that has fill in the blanks.

An attorney should not use these downloadable forms for their estate planning documents – they should take the care to draft proper legal documents to assist with your estate planning goals. Does your advance health care directive have language to allow your agents to access your private health information under HIPAA and/CMIA – these are laws that restrict access to your medical files.

Your Trust should have a fully completed Schedule A.

The Schedule A is a separate document from the Trust and provides a listing of your real estate and other financial assets so the trustee knows what belongs in the trust and where to go when you pass away.

If you have a Trust, you should have a companion or back up Will called a Pour-Over Will.

The Pour-Over Will is designed to be a back up in case you have newly acquired assets or something was not properly in your Trust when you pass away. In most cases, a Pour-Over Will is never used when a Trust is created and properly funded.

The attorney should prepare and RECORD all California real estate into your Trust for you.

There’s nothing worse than seeing a signed Trust Transfer Deed that is among the documents but was never recorded. A good attorney will prepare the Trust Transfer Deeds and cause them to be recorded. Once recorded, the Trust Transfer Deeds should be mailed back to you and kept with your Trust. This is how real estate gets vested or transferred into your Trust to avoid probate.

Your Trust should make sense at least as to Successor Trustees and the Distribution Provisions.

You should be able to read these two sections and tell who will be in charge as a successor trustee when you die and what rules you have set up for the distribution of the trust assets for your beneficiaries.

This is a small list, but it is a good place to start to see if you have quality estate planning documents. As always, I would love to consult to review existing estate planning documents and see if they meet the test! Email me today.

August 16, 2016

Ready to plan to send your child to college? Here is a short summary about a College Savings Plan, or 529 plan (as it is more commonly known as), for saving money for college.

Please designate a successor owner for your 529 plan.

A 529 plan is generally the preferred method to save money for college for your children or other loved ones like grandchildren, nieces, nephews and so on.

You can set up a 529 plan in any state that administers a plan for use for any qualified higher education expenses at any eligible education institution. You do not need to set up a 529 plan under your own state’s plan. You can pick any state’s plan and use that money for ANY qualified educational institution even if not in that state.

Qualified distributions from a 529 plan are not subject to income tax where the distributions are used for qualified educational expenses for the designated beneficiary of that particular 529 plan.

The estate planning connection: 529 plans are not put into a living trust or have payable on death beneficiaries. Rather, a 529 plan has an account owner and designated beneficiaries.

An account owner is the person who opened the 529 plan and can make the distributions on behalf of the designated beneficiary.

A designated beneficiary is the person who can receive the benefit of the distributions for qualified educational expenses (generally payments directly for college tuition, books, etc. for higher education).

If you are the account owner for a 529 plan, you should designate a SUCCESSOR OWNER for this plan in case you pass away before the 529 plan is fully exhausted. This successor owner can be another person and may be the trustee of your trust – you will need to confirm with the 529 plan owner if you can designate a trustee of your trust to become the successor owner of the plan if you were to pass away before the 529 plan is fully used for the qualified educational expenses. You can and should designate a successor owner for a 529 plan that you set up for your children as part of your estate planning.

The California Probate Code also governs the administration of trusts in California where the trust itself is subject to the state laws. You have to read the Trust itself to see if the state laws apply – check toward the last pages of the trust and see if you find a provision similar to this:

California Law to Apply

This trust has been executed and will be administered in the State of California, and its validity, construction, interpretation, and administration shall be governed by the laws of the State. The foregoing notwithstanding, the Trustee may at any time, and from time to time, remove the place of administration of the Trust Estate or any part or all of the property belonging to the Trust Estate to any place in the United States, or in the world, and upon such removal the administration of the Trust Estate shall be governed by the laws of the new jurisdiction. This Trust shall not be construed so as to convert real property located in a state other than that of the settlor’s residence to personal property. If any provision of this Trust shall be invalid or unenforceable, the remaining provisions thereof shall continue to be fully effective.

So if you have determined that a trust is to be governed under the laws of California, then the administration of the trust is largely governed by the California Probate Code. California Probate Code Section 17200 et seq. is a good place to start to review how trusts are to be administered and what the laws are.

Trusts can be contested for a variety of reasons. They can be contested by its terms – meaning that something that was written in the trust itself is suspect or should be challenged. There are limited time periods that may apply to a contest of the terms of a trust. California Probate Code Section 16061.7 et seq. provides guidance on the timing to contest where a proper notice was provided to the trust beneficiaries or other persons entitled to notice. If you receive a copy of a trust in the mail or by other means involving someone who just died and you have questions or concerns about the trust itself, please see an attorney immediately to see if you have grounds or reasons to contest the terms of the trust. Common grounds to contest a trust include fraud, undue influence, lack of capacity or other similar reasons.

Another reason to contest the trust is not the terms of the trust itself, but the administration of the trust by the successor trustee. This type of contest would be considered a breach of fiduciary duty by the acting trustee to the trust beneficiaries. There are many grounds and many types of fiduciary breaches – if you are a beneficiary of a trust and suspect abuse or lack of proper administration, please see an attorney immediately to see what your rights may be in connection with the trust.

Trust contests are largely litigated in the probate courts in California. Each county typically has one main probate court with multiple courtrooms in that court house to handle trust contests and related disputes. Trust contests tend to require experience and knowledge by the litigation attorneys handling the matter of basic estate planning and trust concepts to effectively handle these type of legal matters. If you have a trust matter where you want sage advice in the administration of the trust or if you are the beneficiary of a trust and you don’t like how it is being handled, please contact me.

Mini-Exposé on the New Revocable Transfer on Death DeedBy Jennifer N. Sawday, Esq.

As of this year, California enacted a new revocable transfer on death deed, which was effective on January 1, 2016.

This law allows by a deed to transfer title to residential real property upon the homeowner’s death to another person as desired without probate or trust administration. For those who Google, this section has been codified in California Probate Code Section 5600, et seq. It is similar to payable on death accounts offered by banks and other financial companies and creates, at first glance, a relatively inexpensive way for Californians to transfer their real property after death without administration to the intended beneficiary. The deed must be prepared, notarized and recorded within 60 days of its execution to be valid. The person who is intended to receive the property must also survive the homeowner!

Approximately half of the states already have laws on their books providing some kind of revocable transfer death deed. This legislation was intended to follow that trend.

These deeds may be used for residential properties that have up to four units, or a single tract of agricultural land that is 40 acres or less that is improved with a single family residence. The statute is set to expire/sunset on January 1, 2021, unless the Legislature acts otherwise. Any properly prepared and recorded deed under this law will remain valid despite the sunset clause.

Even with the presumed benefits of avoiding death administration of real property with these deeds – it does not eliminate the need for proper estate planning.

First, a recipient under this type of deed will be liable for the debts (Medi-Cal payback, credit cards and any other secured and unsecured debts) of the now deceased homeowner. This may cause unintended consequences that could be avoided with proper planning.

Second, the deed does not provide any means for someone to handle personal, financial or other affairs of the property owner who is alive but not well.

Third, it does not meet the requirement to handle the disposition of remains.

Some of us might just think, “Great!! you can get the house” However there are serious unknowns on who is going to handle the mail, burying the body and handling all of the other things that come with a life coming to an end! If you want more information or wish to discuss this new law further, send mean email. I am always happy to have a conversation.

January 30, 2012

One of things that you should do when you have executed a living trust is to talk to your insurance agent or carrier. Have a conversation with your agent or carrier about whether your state requires that your insurance agent or carrier name your living trust as an additional insured on your insurance policies affecting your home and other real property that is vested in your living trust.

When I set up my own living trust, I had a conversation with my State Farm agent. She wanted the name of the trust, the names of the trustees and the date the trust was created. She updated my homeowner's, earthquake and umbrella liability policies to name the trust as an additional insured.

In addition to the home and other real property, if, for some reason, you are vesting vehicles into the living trust, please double check with your insurance agent about any requirements concerning vehicles and your existing insurance policies covering those vehicles.

While this is not legal advice, see disclaimer on the side bar, you should talk to your own attorney and your insurance agent to confirm what may or may not be applicable in your situation involving your own living trust.

September 09, 2006

Yesterday I posted about umbrella liability insurance policies as being a good start towards a complete asset protection strategy. Today's post deals with entity formation as another measure of asset protection.

The most commonly used entity formations including
corporations, limited partnerships and limited liability companies. Entity formation can offer some degree of
asset protection.

A corporation can protect personal assets from a business
liability. Personal assets of a
shareholder in a corporation are not subject to liabilities arising from the
corporation. However, for many small
business owners who form corporations, the business owner still signs
contracts, loans and other documents stating that he or she will be personally
liable if the corporation cannot absorb the liability.

A limited partnership is a partnership formed by two or more
persons and having one or more general partners and one or more limited
partners. The asset protection features
of a limited partnership include protection of limited partners from liability
for the business. The general partner
remains liable. Also, creditors may be
restricted from touching the partnership assets for a debt of a limited
partner. The creditor can only stand in
the shoes of the limited partner and receive whatever distributions a limited
partner is entitled to receive. The
creditor puts him or herself at risk because it can be liable for income taxes
on the partnership income even though no distributions have been made. A limited partnership agreement must be properly
drafted to afford this type of asset protection.

A limited liability company is very similar to a limited
partnership except that there is no general partner and all members have
limited liability. The type of asset
protection offered is similar to that of a limited partnership. The major difference is that a general
partnership in a limited partnership is personally liable. A limited liability company has a different
taxation structure so to consider forming this type of entity, taxation matters
should be considered.

Legal Services

Contacting Us

Tel: (562) 923-0971
Fax: (866) 831-7302
jsawday@tldlaw.com

-Estate Planning

Our family package includes a Living Trust, Wills, Durable Powers of Attorneys and Advance Health Care Directives drafted according to your wishes. It includes two meetings with an attorney, one real property deed transfer and free notarization. We can also prepare estate planning documents a la carte depending on your immediate needs.

-Trust Administration

We can assist you with trust administration for a loved one's revocable or irrevocable trust upon his or her death. We can also help you transition your estate planning documents if your spouse has passed away. There are many things that should be done and having our guidance on your side can make the process even easier.

-Probate, Conservatorships and Guardianships

We can help you with your court matters including probate, conservatorships and guardianships in both routine and contested matters. If you have an existing matter open, please be sure to provide the case number when you contact our office.

Legal Disclaimer

The information in this blog is not legal advice, and your use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this blog or any links from this blog is expressly disclaimed. This blog is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.